Ethiopia in the Spotlight

Soon after assuming office in April 2018, the Ethiopian prime minister Abiy Ahmed’s government announced its intention to liberalize Ethiopia’s telecommunications sector, as part of a wider blueprint to gradually privatize several state-owned enterprises. Not surprisingly, this development was met with a great deal of interest by market observers. Potential entrants and investors have been busy ever since trying to ascertain the needs and opportunities encapsulated in this process to engage in the country’s ICT space.
As part of this wave of activity, HIP Consult recently supported the International Finance Corporation (IFC) in assessing Ethiopia’s digital infrastructure landscape. The analysis resulted in a snapshot of the current state of the market and the investments required to drive more ubiquitous broadband coverage and adoption.

Several studies have established the relationship between increased broadband penetration and a country’s GDP growth. The impact of widening internet use can be evidenced throughout many African markets, including neighboring Kenya and Uganda. Ethiopia, though, still ranks relatively low in terms of the penetration and quality of its broadband services. At the heart of this issue is an insufficiency of critical enabling digital infrastructure. 
HIP Consult estimates that the country’s Fiber Reach is 24%, meaning that less than a quarter of the population lives within 5 km of fiber.  By contrast, South Africa is at 75%. 

Data centers and towers are also critical to driving growth of the digital economy. There is currently a dearth of carrier neutral tier 3+ data centers in Ethiopia, although a recent press report indicated the Ministry of Innovation and Technology plans to build a big data center in 2020.  And the number of towers is surprisingly low for such a large, populous country. Among African countries of comparable size and economy, Ethiopia has the least number of towers per subscribers. Expanded tower infrastructure, accompanied with the right equipment, would bolster mobile coverage and improve quality of service.
Along these lines, the project revealed several digital infrastructure gaps which would benefit from investment, including a need to more than double the existing fiber and tower footprint, as well as establish several Tier 3+ data centers.
With the Ethiopian government’s efforts to reinvigorate the ICT sector, the time is ripe for investors to consider if and where to participate in the next phase of the market’s evolution and growth.